Advertisers are having a hard time clicking with consumers online.
Web surfers are becoming increasingly immune to the shriek of banner ads, the online equivalent of freeway billboards dotting the cyber landscape. And technological constraints prevent advertisers from using the sort of high-quality commercials created for TV that have made the Budweiser frogs and Taco Bell Chihuahua pop culture icons.
Some advertisers have become so discouraged by the poor response to their online pitches that they have signed off the Internet, at least temporarily.
Mitsubishi Display Products last year put its online ad dollars elsewhere after learning that consumers who responded to its giveaway offers had little interest in its computer monitors. Levi Strauss recently stopped using Internet ads to try to steer online shoppers to its Web store because they were not effective.
To be sure, advertisers are not beating a full-scale retreat. Research firms that track Internet advertising say money spent on the Web overall is growing. But with individual advertisers having second thoughts, an ad-supported Internet increasingly seems years away.
One problem is that advertisers have not figured out how to connect with online consumers. Thanks to television, most people know that three frogs represent Budweiser and that a bartender can supposedly get rich trading stocks online. But even veteran Web users would be hard pressed to name the last online ad they saw.
The Internet poses significant challenges to creating compelling advertising. Most people do not have the high-speed Internet connections needed to make video ads feasible. And, experts say, while television viewers are used to passively watching ads, Web surfers consider ads a distraction from the content they want to view.
Advertisers also say it is difficult to measure the effectiveness of online pitches and that demographic information about Web users is not as detailed enough.
Even for marketers who have long harnessed the persuasive powers of TV, radio and other media, the Internet is a conundrum.
"Once you get past the technical issues and the measurement issues and the consumer presence reaches critical mass, you still have one very fundamental problem. As marketers, we really don't know how to use the Web effectively," Denis Beasejour, Procter & Gamble's vice president of worldwide advertising, said at a recent industry conference.
It isn't for lack of trying. Advertisers are experimenting with various giveaways and gimmicks to reach consumers:
* Kraft Foods is using banner ads in which the viewer types in several ingredients and gets a recipe, without leaving the site.
* Procter & Gamble ran an ad for Scope mouthwash that allowed viewers to send an electronic "kiss." Viewers clicked on the ad 20% of the time, it said.
* Union Bank of California is running a banner that offers $50 to customers who open a bank account online. The bank says the ad is among its most successful ever online.
But advertisers in general are finding that while some ads are initially well-received, their effectiveness can fade quickly. Research shows the response to banners drops significantly after as little as two weeks.
And Mitsubishi learned that even popular giveaways do not necessarily boost business.
"People click on your ad if you give something away," said Karl Seppala, director of marketing at Mitsubishi Display Products in Cypress, a unit of Mitsubishi Electronics America. The company had tried several promotional Web ads, none of which yielded good results, before abandoning the practice.
Advertisers have learned other lessons. Large banners at the top of a Web page do better than ones on the bottom. Banners pitching new products or services work better if the brand is not identified; consumers seem less curious about a familiar name.
"You have a nanosecond to communicate in a promotional banner online, so your message has to really connect with a customer," said Bob Potter, director of promotions and member communications at America Online.
Still, with the online population rapidly growing--an estimated 67.5 million U.S. computers were connected to the Internet in January, a 50% increase from the year before--advertisers want to be where their customers are. Internet ad spending doubled in 1998 to $1.9 billion--about 5% of what was spent on TV ads--contrasted with $907 million in 1997, according to the Internet Advertising Bureau.
Companies that have suspended online advertising have not withdrawn from the Web entirely. Levi maintains an extensive Web site from which consumers can view and order its clothing.
Kevin McSpadden, director of electronic commerce and retail marketing at Levi Strauss Direct, said Internet ads for the Web store, which included sponsorships of several online music sites, were not cost-effective.
"We were spending anywhere from $56 to $120 per paying customer to get them to come by," McSpadden said. "From a business and e-commerce standpoint, it doesn't pay out."
Indeed, a number of companies are finding that traditional advertising is better at driving traffic to their Web sites than are online ads.
The most successful campaign for AirTouch Communications in terms of driving online sales has been direct-mail solicitations to members of the Automobile Club of Southern California, inviting them to sign up for cellular telephone service through AirTouch's Web site.
The company had run similar direct-mail campaigns in previous years without the online sign-up option, and officials said it was not clear that the Web had led to increased sales. Still, they said consumers have begun to expect Web capabilities of them. Even some companies that operate strictly in cyberspace are using traditional media as their primary means of drawing customers.
Last week, the online technology news service CNet said it would spend $100 million over the next 18 months on advertising, but only 10% of it would be online.
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Despite the dissatisfaction of some individual advertisers, more money is being spent on Internet ads. Still, an ad-supported Internet appears to be years away.
1998: $1.92 billion
1997: $907 million
1996: $267 million
Source: Internet Advertising Bureau
The computer and software industry spends more on online advertising than the other top nine categories combined. In 1998, the top 10 industries advertising on the Web were, in millions:
Most ads are for computers...
Computers/software: $462 million
Direct response: $74
Local services/amusements: $52
Public transportation, hotels and resorts: $32
Source: Intermedia Advertising Solutions
...and most are banners
Even though most people dismiss the effectiveness of banner ads, more than half of online advertising budgets is spent on them. In 1998 the percentage were: